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Information and communication

technologies adoption in SMEs:
literature review
Henry Ongori
Department of Management, University of Botswana,
Gaborone, Botswana, and

Stephen O. Migiro

ICTs adoption
in SMEs

93
Received 16 February 2009
Reviewed 3 September 2009
Accepted 16 September
2009

Unisa School of Business Leadership, Midrand, South Africa

Abstract
Purpose The purpose of this paper is to examine the driving forces, challenges benefits, barriers
and strategies to decrease barriers to information and communication technologies (ICTs) adoption
and assimilation by small- and medium-sized enterprises (SMEs) in this era of globalization.
Design/methodology/approach The paper is based on a review of literature, both online and print.
Findings The paper concludes that, ICTs adoption and assimilation in SMEs is critical to enhance
their competitiveness. In addition, ICTs usage in SMEs will enhance accessibility into the international
markets.
Research limitations/implications The major limitation of this paper is that it only reviews
relevant literature and that empirical findings are not obtained to give an insight and holistic view of
ICTs adoption and assimilation by SMEs.
Practical implications Effective use of ICTs in SMEs has great impact on its competitiveness and
sustainability. In addition, owners/owner managers, policy makers and other stakeholders would be in
a position to understand the challenges faced by SMEs in ICTs adoption and come up with various
interventions to assist SMEs.
Originality/value Despite the challenges faced by SMEs on ICTs adoption, SMEs stand to benefit
from adopting ICTs in their business processes especially in accessing international markets. SMEs
play a great role in the economy and thus need special attention.
Keywords Communication technologies, Small to medium-sized enterprises, Globalization
Paper type Literature review

Introduction
Small, medium and micro enterprises (SMEs) play major roles in economies by creating
jobs and increasing income levels of a majority of the people. These enterprises serve as
drivers of economic growth and innovation. Small and medium enterprises (SMEs) serve
the social goal of equitable income distribution. However, these categories of enterprises
face multiple challenges. To minimise the challenges, several solutions have been
suggested including the adoption of ICTs to boost efficiency and competitiveness.
ICTs refer to the wide range of computerised information and communication
technologies. These technologies include product and services such as desktop
computers, laptops, handled devices, wired or wireless intranet, business productivity
software such as editor and spreadsheet, enterprise software, data storage and network
security among others (Ashrafi and Murtaza, 2008). ICTs adoption and assimilation in

Journal of Chinese Entrepreneurship

Vol. 2 No. 1, 2010
pp. 93-104
q Emerald Group Publishing Limited
1756-1396
DOI 10.1108/17561391011019041

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SMEs offer enormous opportunities to SMEs (Ashrafi and Murtaza, 2008; Schware,
2003). That notwithstanding, previous research has indicated that dissemination and
assimilation of ICTs in SMEs in Africa is lacking and numerous ideas, theories and
perspectives pertaining to the understanding of ICTs use in SMEs reflect the views of
the West (Tsui-Auch, 2003; Martin and Matlay, 2001; Fallon and Moran, 2000).
Furthermore, extant researchers have indicated that ICTs adoption in SMEs in
developing economies is at present under researched, conceptually confused and
widely generalised (Ramsey et al., 2003; Mira, 2006).
The main purpose of this paper is to identify gaps in the literature relating to SMEs
adoption of ICTs. Specifically, the review tries to give a full insight into the driving
forces, role and barriers to ICTs adoption in SMEs.
Nature and characteristics of SMEs
There is no universal definition of SMEs that is widely accepted (Mutula and Brakel,
2006, p. 403). The definition varies from country to country but is often based on
employment, assets or a combination of the two. Hence, different definitions are used in
different countries. For instance, the Organization for Economic Co-operation and
Development OECD (2004) defines SMEs as enterprises that have less than
500 employees. In Britain SMEs are defined as enterprises with annual turnover of
e2 million or less and with fewer than 200 paid employees while in Australia, SMEs are
defined as enterprises having between five and 199 employees (Kotey and Folker, 2007)
but in Indonesia an enterprise with five to 99 employees (Mira, 2006, p. 72) whereas
in Kenya, SMEs are defined as those enterprises that employ 11-100 workers (Moyi,
2003, p. 223).
SMEs are generally distinguished by the nature of their production and
management arrangements, trading relations, financial practices and internal
competence. They are not a homogeneous set of businesses but a heterogeneous
group of businesses usually operating in the service, trade, agri-business and
manufacturing sector (Lukacs, 2005, p. 3). They vary in size, age, sector, motivation,
mode of organization, ethnic background, location, knowledge base, power and control
of resources and innovative capacity (Vivienne and Roberts, 2005, p. 522).
Many studies (Sharma and Bhagwat, 2006; Bunker and Macgregor, 2000, p. 75) have
examined the differences in management style between large businesses and SMEs.
These studies have shown that, among other characteristics, SMEs tend to have a
small management team (often one or two individuals), they are strongly influenced by
the owner and the owners idiosyncrasies, they have little control over their own
environment and they have the desire to remain independent (Dennis, 2000, p. 289;
Drakopoulou-Dodd et al., 2002, p. 212).
Importance of SMEs
SMEs play an important role in all the economies of the world (Mira, 2006, p. 70).
In developing countries, SMEs contribute to job creation, income generation and
distribution (Temtime and Pansiri, 2006, p. 55; Machacha, 2002, p. 277; Lange et al.,
2000, p. 6). They provide a breeding ground for entrepreneurs and employment (Thurik
and Wennekers, 2004).
For instance, in India, SMEs have been consistently outperforming large companies
on crucial parameters such as growth in production and growth in employment.

The sector accounts for 40 per cent of the industrial production, 35 per cent of the total
exports and provides about 80 per cent of employment in the industrial sector (Sharma
and Bhagwat, 2006). In Singapore, 51 per cent of the total workforce is employed in the
small- and medium-scale sector, and in particular SMEs in the manufacturing sector
accounts for 15 per cent of gross domestic product (Lukacs, 2005, p. 4). In Hong Kong,
SMEs are the largest employers with over 1.4 million people and in Japan 81 per cent of
the employment is in the SMEs sector (Lukacs, 2005, p. 2).
In Africa, SMEs employ more than 40 per cent of all new entrants to the labour force
because they tend to be more labour intensive than large firms and are thus better
placed to alleviate unemployment (Muuka, 2002, p. 2). Further, extant research has
indicated that SMEs have contributed greatly to job creation and in promoting social
economic development (Mutula and Brakel, 2006, p. 403). Thus, according to a baseline
survey conducted in 1999 in Kenya, the SME sector employed 5.1 million people,
accounting for 74 per cent of the total employment. In recognition of the importance of
the sector, in 2003 the Kenyan Government created a SMEs policy framework to
promote employment creation, income generation and poverty reduction.
Challenges hindering SMEs development and competitiveness
The challenges faced by SMEs include limited access to manufactured inputs,
especially high-quality imported goods and lack of skilled human capital to exploit and
improve ICTs within the business (Mutula and Brakel, 2006, p. 403; United Nations
Development Programme (UNDP), 2006, p. 1). In addition, lack of managerial skills,
finance, market information and commercial intelligence gathering have been
identified in the continuum of challenges facing SMEs (Qiang et al., 2006; Hanqin and
Allison, 2007, p. 277). SMEs are also faced with problems of small markets, inadequate
regional integration, poor infrastructure, bad governance, legal and administrative
hindrances and failure to access credit (Ongori, 2008).
Potential use of ICTs in SMEs
The term ICTs is defined in a broad sense as technologies dedicated to information
storage, processing and communication (Rao, 2004, p. 262). According to Martyn et al.
(2003, p. 307) ICTs constitute a range of software, hardware, telecommunication and
information management technologies, applications and devices that are used to
create, produce, analyze, process, package, distribute, retrieve, store and transform
information. Thus, ICTs are organized communication networks and data resource
that collect, transform and disseminate information within and among organizations
(Seyal et al., 2000, p. 8; Sharma and Bhagwat, 2006, p. 204).
Adoption of ICTs provides many benefits across a wide range of intra- and
inter-firm business processes and transactions. ICTs adoption improves information
and knowledge management inside the firm and can reduce transaction costs and
increase the speed and reliability of transactions for both business-to-business (B2B)
and business-to-consumer (B2C) transactions. In addition, they are effective tools for
improving external communications and quality of services for established and new
customers (OECD, 2004, p. 1).
Through the use of ICTs infrastructure, SMEs can engage in e-commerce. Electronic
commerce will aid them in increasing their efficiency in their day-to-day business

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operations and sustain their business growth through the opening of new market
channels, and to increase the flow of information.
Access to information is a critical factor for the success and survival of SMEs in the
global market (Rasmussen, 1997). Through the effective use of ICTs, SMEs are able to
sell their products to international markets and favourably compete with large
corporations (Ramsey et al., 2003, p. 255). Thus, ICTs can be used as a strategic weapon
to underpin the business strategy of SMEs (Maguire et al., 2007, p. 39).
In addition, ICTs enhance SME efficiency, reduce costs and broaden market reach,
both locally and globally. Since the SME sector plays a major role in national
economies, these factors to individual SMEs collectively translate into positive results
in the form of job creation, revenue generation and overall country competitiveness.
Governments, therefore, have an interest in the promotion of access to and use of ICTs
by SMEs (Mutula and Brakel, 2006, p. 404).
Unfortunately, a number of factors hinder or discourage SMEs from fully realising
the benefits of ICTs, including lack of knowledge, resources and trust. There are also a
host of other challenges faced by SMEs in different countries. For instance, Kenyan
SMEs are faced with problems of limited access to markets, finance and e-commerce
technologies (Migiro, 2006, p. 35). Thus, the productivity of Kenyan SMEs has
remained low over the years due to multiple challenges such as lack of awareness,
inaccessibility to global markets due to fragmented and incomplete information,
technology, policy regulations and lack of strategic vision (Migiro, 2006, pp. 36-7; Moyi,
2003, p. 229; Martin and Matlay, 2001, p. 340; Miller and Besser, 2000).
Conceptual framework
In light of the existing gap and factors that hinder SMEs from fully realising the
benefits of ICTs, the conceptual framework has been developed to facilitate the process
of ICTs as shown in Figure 1. This conceptual framework is based on four elements.
These elements are the driving forces for ICTs adoption; restraining forces (barriers) to
Driving forces for ICTs adoption

Barriers
to ICTs

Lack of human capital

Lack of support by
government

Strategies to
ICTs

ICTs
tools

Human capital
development

Personal computers

Outcomes of
ICTs adoption

Access to
international markets

Laptops
Infrastructure

Increase customer base

Faxes

Lack of security

Government support

Robust information
Scanners

Figure 1.
Conceptual framework
for ICTs adoption

Lack of infrastructure
Lack of financial

ICTs adoption; ICTs tools and benefits of ICTs adoption. The driving forces include the
change in technology, globalization, competition, market advantages and personal
consideration of SME owner managers. These forces compel owners/managers to
adopt ICT tools in their business processes. However, despite these driving forces,
SMEs have failed to adopt ICTs in their business processes successfully because of
restraining forces. These restraining forces (barriers) include unfamiliarity with
software application, lack of infrastructure, lack of human resource and skills, lack of
information system knowledge, high cost of internet connectivity, lack of security and
reliability. Although they are restraining forces to ICTs adoption in SMEs, SME
owners/owner managers need to put in place strategies to minimise these challenges.
Some of these strategies include human capital development. This will be done with
the assistance of other stakeholders like the government. The government should put
in place the infrastructure and formulate policies in promoting ICTs adoption in SMEs.
In addition, the non-governmental organizations will assist SMEs in terms of financing
than to buy ICTs tools and developing their manpower. Despite the restraining forces,
ICTs adoption in SMEs, will improve their customer service, flow of information,
inventory management, control and accountability, opportunities for international
markets, managing resources effectively and efficient administration. But in case of
failure to adopt ICT tools in their business process, SMEs stand to lose in accessing
international markets, inadequate robust information, resources will not be managed
properly and this will lead to inefficient administration.
Drivers to ICTs adoption
The impact of globalization has compelled SMEs to adopt ICTs, so that they can
survive and compete with large companies. The business environment is not static and
geographical distances are of no importance for customer-supplier relationships
(Sharma and Bhagwat, 2006, p. 200). Evidence shows that durable productivity gains
have been achieved in enterprises which use ICTs (Bresnahan et al., 2002). The rate of
expansion of globalization has encouraged, among other things, the effective flow of
data in organizations, which would only be facilitated by the use of ICTs. A study
conducted by Sharma and Bhagwat (2006, p. 201) indicates that the flow of information
in an organization is the bloodline of any business operating unit irrespective of its
size.
The evolution of technology has affected the way businesses operate. First, it has
changed the industry structures and altered the degree of competition. Second, it has
created a competitive advantage for the businesses which have adopted ICTs in their
business processes. Third, it has affected business operations. This change compels
SMEs to adopt ICTs in their business processes to cope with these changes in the
businesses environment (Ongori, 2008).
ICTs adoption in SMEs would provide a means to access, process and distribute
greater amounts of data and information quickly in order to make thoughtful decisions
(Jimmy and Li, 2003, p. 168). Hence, there is need for SMEs to embrace the
state-of-the-art technologies in order for them to penetrate the international markets
and remain competitive despite challenges posed by globalization, liberalisation and
technological changes (Sharma and Bhagwat, 2006, p. 200; Dangayach and Deshmukh,
2001, p. 256). This situation has forced SMEs to adopt ICTs in their business processes
in order to counter the competition posed by large and multinational companies.

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Windrum and de Berranger (2002) argued that business action strategy, which is
driven by the top management and information intensity of the business, facilitates
ICTs adoption in SMEs. The business action strategy is driven by the
owner/managers ICTs goals, ICTs needs and financial resources. In addition, a
large volume of information intensity compels SMEs owner/managers to adopt ICTs to
assist in management and operational control.
Extant researchers have found that the driving forces for ICTs adoption by SMEs
include competition, organizations ICTs readiness, external pressure to adopt,
customer/supplier dependency, structural sophistication of the business, need to
improve customer services and increase in sales (van Akkeren and Harker, 2003, p. 208;
Vrazalic et al., 2002, p. 114).
There are several challenges that make it difficult for SMEs in developing countries
to adopt ICTs. Moodley (2001, p. 96), Mutula (2004, p. 151), Jain (2002, p. 57) and Mutula
and Brakel (2006, p. 410) identified some of these challenges as high cost of access to
telecommunications, lack of government policy towards ICTs, use of obsolete
technologies, under utilization of existing technologies, a limited indigenous base and
digital illiteracy, lack of skilled and trained manpower, poor communication
infrastructure; ignorance of ICTs benefits, high cost of internet connectivity, cost of
ICT equipment and resistance to change.
Cragg and King consented that one of the strongest inhibiting factors for small firm
information technology implementation is lack of information system knowledge. Most
SMEs employees do not have the necessary knowledge on information technologies; it
becomes difficult for them to adopt ICTs in their business. Similarly, Chiware and Dick
(2008, p. 112) and OECD (2004) indicated that the ignorance surrounding technology
fuels concerns about security, lack of physical infrastructure, costs, legislation and
interoperability of the ICT tools. Besides, ICTs adoption theoretically fails to benefit
SMEs due to several challenges from the external business environment.
Strategies to decrease barriers to ICTs adoption
In this era of globalization, SMEs are compelled by external and internal forces to
adopt ICTs in order to position themselves strategically in the environment. SMEs
stand to benefit in adopting ICTs in their business process, however, SMEs are faced
with many challenges which hinder ICTs adoption. For instance, lack of infrastructure
and human capital are some of the barriers to ICTs adoption. Despite all these
challenges, there many strategies suggested by various scholars in the literature on
how to resolve barriers encountered by the SME owner managers in ICTs adoption as
shown in Figure 2. These strategies are infrastructure, human capital development,
financing and legal framework.
Infrastructure strategy is normally provided by the government in assisting SMEs
by offering them subsidies and encouraging ICTs providers to have special discounts
for SMEs at a reduced cost. The government interventions therefore tend to framework
ICTs policy which is crucial in building infrastructure, investing in research and
development, facilitating technological transfers, creating science parks and creating a
legal framework (UNDP, 2007, p. 13). In addition, there are ICTs policies which provide
tax incentives for investing in ICTs, subsidising ICTs training for SMEs, thus creating
incentives for e-procurement and other online activities. Lastly, there should be an
SMEs policy, for instance, in providing SMEs financing and business consulting

ICTs adoption
in SMEs

Financing
option strategy

Infrastructure
strategy

ICTs adoption
strategies

Legal frame
work strategy

Human capital
strategy

services, simplifying registration procedures, providing tax breaks and in creating

incubation centres (Chiware and Dick, 2008; Mutula and Brakel, 2006, p. 410). The
government should boost SMEs in ICTs adoption process by increasing affordability
of ICTs through grants, credits, leasing options and tax incentives (UNDP, 2007, p. 19;
Chiware and Dick, 2008).
SMEs will benefit if government takes initiatives to establish a legal framework to
legitimate ICTs usage or adoption in SMEs. This legal policy and regulatory
framework would encourage the usage of ICTs in SMEs by removing the restraining
forces of ICTs adoption in SMEs and thus, create a conducive business environment.
In addition, internal barriers will be resolved by owners motivation and experience to
access resources (money and people) with more management focus on profits rather
than on sales, and this will make SMEs to develop a stable financial resource (Mutula
and Brakel, 2006; Chiware and Dick, 2008).
Benefits of ICTs adoption in SMEs
In the contemporary business world, ICTs enhance the competitiveness of business
enterprises. ICTs have enormously contributed to improved knowledge management,
access to robust business information, efficient administration, control and
accountability, access to markets and growth of SMEs in both developed and
developing economies. ICTs also contribute to the management of enterprise resources
economically and effectively as shown in Figure 3.
ICTs adoption improves information and knowledge management in the firm,
reduces transactions cost and increases the speed of transactions for both B2B and B2C
transactions. In addition, ICTs are effective tools for improving external
communications and quality of services for established and new customers (Lukacs,
2005, p. 4; Rosemary and Craig, 2004).
ICTs enable SMEs to have access to robust business information that leads to
organizational effectiveness (Irani, 2002, p. 12). These tools are no longer viewed as a
technical service, but as a critical resource to enhance the competitiveness of SMEs in
any business environment (Kohli and Devaraj, 2004, p. 56; David et al., 2002, p. 51;
Tumolo, 2001, p. 55).

99

Figure 2.
Strategies to decrease
barriers to ICTs adoption

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Knowledge
management

Efficient,
administration,
control and
accountability

100
Benefits of
ICTs adoption

Managing
resources
economically

Access to
robust
information

Figure 3.
Benefits of ICTs adoption

Access to markets and

growth

The adoption of ICTs is essential for the efficient administration of SMEs, and in the
delivery of quick services. ICT tools enable information to be electronically stored,
accessed, delivered and retrieved for use in the organization for decision making
(Schware, 2003; Brunn et al., 2002, p. 287). Similarly, Mutula and Brakel (2006, p. 409)
asserted that most SMEs across the world are increasingly adopting ICT tools to
enhance their e-readiness status to identify, acquire, organize, disseminate and apply
information for informed decision making. In addition, ICTs play a great role in
strengthening accountability systems of business enterprises. For instance, the
performance of employees in SMEs can be tracked and budget processes can be
transparently implemented (Carlos, 2007, p. 4).
As the world economies continues to move towards increased integration as a result
of advances in information communications technologies, SMEs are likely to derive the
benefits by participating in regional and international markets. ICTs adoption in
SMEs is critical for their survival in this era of globalization. For instance, in the
Caribbean, several SMEs have grown and expanded into international markets by
largely using ICTs, improving customer service and information access. Also in
Jamaica, there is increasing adoption of ICTs in the SMEs sector, which is attributed to
increased awareness and declining global costs of hardware and software (Southwood,
2004); whereas in Singapore; ICTs adoption has greatly contributed to the growth of
SMEs businesses and their competitiveness both regionally and globally (Saheer and
Chris, 2003, p. 95).
The seamless transfer of information through shared electronic files and networked
computers increases the efficiency of the business in terms of documentation, data
processing and other back-office functions like organizing of incoming orders and
preparing invoices. ICTs adoption in SMEs to a certain degree can reduce greatly the
operational costs by decreasing material, procurement and transaction costs, resulting
in lower prices for intermediate and finished goods, and they can also use more and
better information to improve the value of their output (OECD, 2004, p. 9). In China, the
vibrant and promising growth of internet business is highly encouraged in SMEs in
order to manage resources effectively (Martin and Matlay, 2001, p. 403).

ICT tools aid in sharing information within and outside the organization. In
addition, ICTs tools improve SMEs responsiveness to customers/client feedback and
information on employees professional experience (Saheer and Chris, 2003).
Conclusions and implications
Adoption and assimilation of ICTs by SMEs is critical in this era of globalization.
SMEs are the major drivers for economic growth of an economy. The major
determinants of ICTs adoption by SMEs are competition and access to international
markets. ICTs adoption by SMEs increases the productivity process, efficiency of
internal business operations and connects SMEs more easily and cheaply to external
contacts locally or globally. Although ICTs adoption will increasingly empower SMEs
to participate in the knowledge management economy, still SMEs are faced with many
challenges which impede SMEs not to adopt ICTs in their business processes. These
challenges include lack of financial, human resources, unsuitability for the type of the
business and security and trust of ICTs tools. In addition, most SMEs
owners/managers do not understand the benefits of ICTs adoption, lack of legal
framework and inadequate infrastructure.
This review of literature will contribute to the body of knowledge by identifying to
the owners/managers, policy makers and other stakeholders the driving forces,
benefits and barriers to ICTs adoption. SMEs play a significant role in an economy
especially through their contribution in economic growth and innovation.
The limitation of this paper is that it is a preliminary work that needs to be
contrasted with empirical findings to give a holistic view on ICTs adoption by SMEs.
In addition, there is need for triangulation methods to be applied so that one can make
concrete conclusions on the determinants, benefits, barriers and strategies to resolve
ICTs adoption and assimilation in SMEs.
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Corresponding author
Henry Ongori can be contacted at: [email protected]

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